Auto Sales Have Not Soared As First Predicted

Auto Sales Have Not Soared As First Predicted

by Amy Lignor

When 2017 first began, it was stated by financial and industry “experts” that the auto realm would continue to have yet another amazing year. 2016 was a thrill ride when it came to auto sales, yet now that sales figures have been released, there are many people surprised that figures are far less than first expected. The only one fact that has remained is that everyone – from sea to shining sea – still seems to love cars. They all want the ‘best of the best’ sitting in their own driveways, even if they have no shot at actually paying for them.

When it comes to consumer debt, the Federal Reserve Bank of New York has stated that outstanding auto loans now total $1.16 trillion – their highest point in 18 years (this is an increase of $93 billion that occurred in 2016 alone.) That would make sense, considering that auto sales were huge last year. The problem comes in the form of delinquency rates. The number of people not paying back their auto loans has risen – with 3.8 percent of payments more than 90 days late, placing these loans in the “seriously delinquent” category.

According to Bloomberg, “U.S. drivers with credit scores of less than 620 borrowed $244 billion to buy cars in 2016, a tally not matched since 2006 and 2007 when the same strata of buyers rolled off with $254 billion in auto loans.”

It was suggested back in 2016, when auto sales increased by leaps and bounds that lenders might be allowing car buyers to borrow more than they can afford. Standards have been lowered and repayment times have even been stretched past the norm, which has allowed people without enough cash to invest in bigger trucks and SUVs that were far out of their budget ranges.

So…is all that why 2017 has not shown the “huge increase in sales” that the market originally predicted? Seems so.

The numbers clearly show that sales fell in January, following that record year for automakers. But that announcement did not completely stifle the belief that the auto industry would continue to rise. The industry could still witness that “boom” in 2017, especially seeing as that pickups and SUVs are being sold in 2017 more than passenger vehicles, proving that auto manufacturers can maintain their profits.

It is also a fact that car makers have gotten more cautious, making less “fleet sales” that include cars being sold to auto rental businesses, government facilities, and large organizations that supply cars for their upper management, etc. These sales are far less profitable for the automakers than selling to consumers, so they have not been making those sales as often as they used to.

Even with the latest figures, showing yet another fall in February, the one thing car makers do continue to benefit from is the wide accessibility of credit that comes with low interest rates. The latest sales figures break down this way:

Nissan: 3.7% (-1.8% expected)

Ford: -4% (-4.3% expected)

GM: 4.2% (2.5% expected)

Fiat Chrysler: -10% (-8.4% expected)

Honda: 2.3% (2.4% expected)

Toyota: -7.2% (-4.8% expected)

Subaru of America: 8.3%

BMW: -2.5%

There are a great many problems arising in the business world, mostly because of government changes and, perhaps, from having too many egos in one place that are not seeing the full picture. Consumer debt is stretched, and may soon be stretched to the breaking point. If that ‘break’ occurs, the predictions that 2017 was going to be another fantastic year for automakers, yet again, may just end up to be the worst prediction ever made.

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